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Sorry for late reply but I think by 2026/7 we should see a decent sp for those who hold on. Hard to predict and some delays are almost inevitable but all being well id like to think wed be close to stage two and have a good chance of 25 to 35 sp by then which will just fit nicely with my full retirement.
A maiden divi of even 1p would be very welcome at stage two and Vermelho is such a nice bonus to have.
Definitely a keeper for those able to.
Enjoy reading the knowledgeable posters here.
Best wishes to all.
Ggg.... The company has said a few different times that Vermelho is about 2 years behind Araguaia. If we get Araguaia first production in late 2023 wouldn't that mean Vermelho say early 2026? How would the market value the NPV of Vermelho as it nears production?
A2 is not another oilfield, or a new mine or discovery. Its the same resource from the same pits, the A2 investment is in an extra nickel processing line. Again production from it should be added 18 months to 2 years after A1 wity no extra capital raise needed. Full production from Araguaia should be in 2025, high grade ores to start should see 30,000t in 2025.
I think this is all a lot closer than you think. These are not deep mines or exploration projects, the ore lies just beneath the surface and will be mined using diggers and trucks.
We could absolutely see 50-60kt production by 2026. A billion dollars in revenue for 400 million in costs? What's that worth?
Vermelho will be a complex deal, I suspect to accelerate it they will seek JV or even license post FS to avoid any further debt and equity dilution. Full Vermelho production won't come to HZM so it needs to be apportioned.
I think you're being wildly pessimistic. These assets are a lot further on than you're allowing for.
Ggg.... The company has said a few different times that Vermelho is about 2 years behind Araguaia. If we get Araguaia first production in late 2023 wouldn't that mean Vermelho say early 2026? How would the market value the NPV of Vermelho as it nears production?
A2 is not another oilfield, or a new mine or discovery. Its the same resource from the same pits, the A2 investment is in an extra nickel processing line. Again production from it should be added 18 months to 2 years after A1 wity no extra capital raise needed. Full production from Araguaia should be in 2025, high grade ores to start should see 30,000t in 2025.
I think this is all a lot closer than you think. These are not deep mines or exploration projects, the ore lies just beneath the surface and will be mined using diggers and trucks.
We could absolutely see 50-60kt production by 2026. A billion dollars in revenue for 400 million in costs? What's that worth?
Vermelho will be a complex deal, I suspect to accelerate it they will seek JV or even license post FS to avoid any further debt and equity dilution. Full Vermelho production won't come to HZM so it needs to be apportioned.
I think you're being wildly pessimistic. These assets are a lot further on than you're allowing for.
Jesus pickedpeck, and you mention my post is full of assumptions. Can't see any of your forecasts happening in the time-frames you've provided. I'd put the probability of 60-100p by 2025 as about 1 in 100. And that includes if the company is taken out during this time. As mentioned I can see this as an easy 5-bag (including the dilution aspect of any equity raise) within 5 years post financing, which would have the company sitting on a £1bn mcap after 2 years of A1 production. Vermelho producing in 5 years is a joke. Look at the time taken for A1, which as you say is a relatively straightforward build. As for adding A2 npv, no I wouldn't do that in the same way as I don't add the npv of oil fields that have been discovered but nowhere near being developed. And the market doesn't do it either. Same goes for Vermelho. You're talking about doing this when the market values the entire company at 20% npv of A1 (and 20% of the current mcap is cash). When a decision to start construction on A2 has been made then some value will be ascribed by the market. And it will gain in value in the same way as A1 i.e. toward 100% npv when it nears full production.
I agree there may be a sp bump on finance providing it isn't too dilutory to PIs. But it will fall back as most of them do to the raise price and potentially below, before it starts a slow but steady climb to full npv value nearer production (likely 3 years from now). This means a likely 2-3 bag over 3 years. Then yes it will be on a producing mine multiple, which will get stronger with a few years showing their operating prowess (and subject to Ni prices). This is a great company. I made quite a bit of money on it in the past year. But I simply don't see 60-100p by 2025 happening in a million years. I do see strong chance of 35-40p in 5 years (2027) though. AIMHO GLA
Just to add... At the current exchange rate of $1.42 to the pound and Ni hovering around $18k NPV8 of A1 and A2 is £1.048Bn, call it a billion pounds in round numbers.
As we enter production an efficient market would have the mkt cap at the NPV plus the valuation of Vermelho. If Nickel is still rising then the price will be higher, if it is falling it will be lower. Even my very pessimistic view of 50% of NPV valuation still makes a £500m mkt cap, a more realistic 80% at production gets us to £800m.
Share price obviously depends on the equity raised, but 2.7Bn shares as assumed below is a share price of about 30p for the £800m, plus whatever you ascribe to Vermelho.
My forecast is for the share price to double next year... 15p. And then double again as we enter production... 30p. Full A1 production the year after and nickel crunch landing, plus A2 approaching production and Vermelho in development could see us double again 60p. If they can get Vermelho into production the year after could we break 100p in 2025?
Anyone wondering about the Scandinavian ECAs, maybe worth a look at these babies. Would love to play with one :)
https://www.volvoce.com/global/en/our-offer/articulated-haulers/
https://horizonteminerals.com/uk/en/npv_calculator/
Glad to oblige, GGG made me hit the biscuits. Not long to go now surely.
GGG - I have to say there are some poor assumptions in there.
First of all the 30% to NPV number, I have seen companies trade anywhere between 40 and 110% post finance depending on commodity and upside, very few high risk projects trade as low as 30%. That assumption also still factors Vermelho at $0, that seems unlikely given the ongoing FS development. The low percentage against NPV post finance for some miners is due to complexity and risk of mine build. This particular mine build is about as low risk as it could be. This is not really building a mine but a nickel processing plant close to existing transport links. The mine is no more complex than shallow pit with some diggers and trucks. Once the power is in the hardest bit is done, it is really then about installing some expensive machinery in sheds.
Also which NPV are you using? At A1 finance A2 becomes a reality also, I would suggest over a five year period you should be at least looking at A2, and more likely A1&2 plus V. If you're taking A1 only, what valuation are you allowing for A2 and V? The NPV calculator on the HZM website that Luke2 keeps posting the link to is a useful tool. The base case was built on $14k Ni not $16.8, and definitely not $18k today. Predicting the future price of Nickel is a hard game, but I think a decent working assumption should be the current price rather than a lower one.
Thirdly the 100% dilution also seems unlikely depending on the raise price. Given the recent raise is already contributing to the equity stake and construction costs have already started with the power line, I'd hope the debt ($325), plus off takes (???m) plus current cash situation would mean no more than 3Bn shares at the outside, but I would hope for somewhere around 2.7 depending on the size of the off take agreements or royalties. Thats 60-75% new equity compared to today. Looking at the equity another way, I suspect they will raise $100m in new equity as underpinned by the cornerstone investor. Whatever the public offer raises would be subtracted from the cornerstone rather than added to it. Call it £75m for the sake of argument, that again lands us at 2.7Bn shares if the raise price is 7.5p .
I depending on the construct of the finance package I would expect the trading range to advance from here. Post finance and de-risked I would expect a quick leap to 12-14p and then a steady rise as go live approaches geared to the Nickel price. I'd be surprised at go live to see a price less than 20p a share , or in the region of £500m mkt cap.
Hi Duster, you also need to account for doubling of share count when they raise the finance (or give away % of company or project). If they have an npv 8 of $740m (£520m) and you allocate 30% value at double the number of shares then you'll see the sp at a lower level. Better option for PIs is they sell part of the asset for a decent sum (say $75m for 30%) and use this money as equity to secure their loan. By giving away 30% of the project they negate the need for dilution, and minimise future capital outlay. In this scenario the share price would likely increase form current levels. It's why I was saying being in the company post finance, but years from production, often results in losing money initially. Obviously over the 2-3 years construction period the 30% moves toward 100% of npv and the share price increases at a decent rate. You then get a multiple value of a producing mine (so even greater value) about a year or so later providing nickel is greater than the $16,800 base case. The market is a fickle place where even IIs will sit on the sidelines for a little while to ensure there's no costly surprises or delays. Glencore famously don't do greenfield for this very reason. They'd rather pay more down the lie but know what they're getting. I'm hoping they raise the money soon and it will give me a chance in 12 months to sink a large amount of money for the 2 year construction period at a better share price. They may of course get taken out partially or fully and you guys will make a short term killing, but that's the risk I suppose. Either way I do see this company as a 5-bag in 5 years guaranteed. GLA
A 5 bag from here represents an mcap of £620m
That would be for a producing mine, at least 14kt of nickel per year at $20k/t nickel ~ $280m
Even more likely stage 2 would be online/on the cusp and bringing the total output to 28kt per year ~ $560m
@$25k/t nickel price your looking at $700m per year.
That's just for Araguaia and disregards Vermelho, the bigger, higher grade resource.
A 5 bagger from these levels is not completely out of the question.
5 bag in 5 years??
Don't think so most miners trade at 30% of NPV after finance for production.
Cheers fellas. Interesting thoughts. This was the biggest part of my portfolio a little while back. I sold everything (4m shares) in the big rise about 9 months ago to get into a few other places - Bwana mentioned i3e, which is now my biggest holding. It will be interesting to see how this plays out i.e. sp level for the capital raise, and how long before the sp starts its climb prior to production. Often companies will tend to drift downward post financing in the early construction period, before starting a steady rise nearer production. This is why I asked how long after financing before there's a producing mine. Fwiw I think this is a fantastic company and first class mgt. My hope is for some of my other investments to take off so I can make this my biggest holding again. I agree anything under 7.5p should be a safe entry point - This should give a holder an easy 5 bag within 5 years. GLA
yes there might be contingency leftover from A1 also. They have to forecast conservative then with a trailing wind get it built earlier. These mines will make so much money capex of $200m will pay back in around 2 years for A2...
I think the cost of A2 is $199m in the presentation.
Bloodshot you might be right - I'm looking at page 15 of the recent presentation:
https://horizonteminerals.com/news/en_20210510-investor-webcast.pdf
Hard to be sure but I assume year -3 is 2021 which would put 2024 (the first year of production) at just below breakeven - I don't think 2024 can be the highest return i.e. Year 1 if the mine has just gone operational. Thereafter there are two very solid years of returns returning around $300m in two years (best ores) which would be 2025 + 2026. I don't know if the FCF here allows for capex payback - but if it does, then $300m FCF would be sufficient for A2. I would also imagine it is possible to start construction of Phase 2 without having all the cash in bank once the company is making steady income you don't need to wait for all the capital cost to be in, you can start a year ahead.
All of these estimates are based on nickel prices which I think will prove very very conservative in the future. FCF will be much higher in 2025 and 2026 as long as the nickel price is north of $20k which I think it will be.
Wasarunner..not sure 2 to 3 years will be enough..maybe more like 3 to 4 for enough funds for stage two from FCF.
Not an expert but I do remember that theres a steady ramp up procedure after production starts. Maybe others will have a better idea but im guessing 6 months to a year to get to up to full production?
Depends on many technicalities I have no idea about.
Very good Tricky like the thinking
Time to load up here.
Interesting thinking guess we find out in around 6 weeks time! Not out of the question but also equally likely they just didn't feel it necessary to say. I don't know how these deals happen, whether we would see finance first then offer or offer even prior to finance. I would imagine the buyer would want to see those banks committed? My guess is still a sale at around production but who knows I've been wrong before! If it is this year lets be having 30p but quickly before my other plays take off....
wasarunner
That Friday 19.57 hrs. post was a bit cryptic so let me elaborate.
I can't remeber who it was that said this but they suggested that the recent fund raise might have been to bolster the balance sheet prior to discussions commencing on a sale. You would want to have as healthy a balance sheet as possible if you thought these discussions were likely to last for any length of time. I put that idea to bed until yesterday when the Q1 results were released and there was no mention of any long lead time orders being placed. Maybe they have placed some orders and they just didn't feel it necessary to say. Three months since a fund raise to facilitate placing order for long lead items but not confirmation of any order being place in Q1 results. A bit odd that don't you think?
TDT
>>So if building from FCF I would expect it to be 2-3 years later.
A couple of years FCF would generate most of the revenue to cover Stage 2 capex, as they are mining best ores first. So this scenario I would expect them to start maybe building Stage 2 at the beginning of 2026 (having produced in 2024 and 2025). But I think it will be earlier because I don't think it will be from FCF.
>>Araguaia 2 should be 18 months or so later if my memory serves me right (other posters please correct me if this is wrong)
Bwana the current plan is to finance A2 from FCF so if that is indeed the path they go down it won't be 18 months after A1 as they need some free cash first, and I think it might be an 18 month build. So if building from FCF I would expect it to be 2-3 years later.
However, I don't think it will be built from FCF as when production starts on A1 they would be able to raise finance (particularly in a strong nickel price environment in 2024?) to accelerate construction. So something like end of 2025 might be realistic for A2 to be operational - 2 years after A1? May be a tad optimistic side.
I am hoping Vermelho is also starting production around 2025. 2025+ will be the exciting time for those patient enough to wait that long here.....
To answer TDT 30p / 60p / 90p question - it's a tricky one! If we got 30p now I'd need to find a home for it which is inflation proof. Currently I believe nickel to be inflation proof in a commodity bull market. But there would be other similar opportunities no doubt to diversify into - I quite like copper as well. Otherwise very happy to hold out for the 90p levels (plus divs)!
Firstly welcome I enjoy your posts on I3e and understand your frustration with management there.Before I answer your question I will just mention that I believe the HZM management to be very high quality plus if you communicate with them they actually reply to calls and e-mails.Witness they are about to pull of a $450m fundraise off a $175m market cap-a hugely complex and multi faceted deal.
To answer your question, production on Araguaia 1,should start production end of 2023, beginning of 2024, Araguaia 2 should be 18 months or so later if my memory serves me right (other posters please correct me if this is wrong).Vermelho should be fully permitted in a year and then a JV partner (they are queuing up) will be chosen to develop that mine-all assets are high quality, but V is the jewel in the crown.
Finance for A1 is due end of June-the shares may remain a bit dull before then.Personally believe now is an excellent entry point-last fundraise was done at 7.5p.
The Board here is good-so if you have questions ask.Meanwhile Jeremy Martin's recent interview is worth watching (1 hour) ,I have posted the link below and the presentation is on the website, but link also posted below.
https://horizonteminerals.com/news/en_20210510-investor-webcast.pdf
https://horizonteminerals.com/uk/en/videos_and_audio/